Gold Price Analysis: XAU/USD moves back above $1730 level, lacks follow-through

• The risk-off mood, sliding US bond yields assisted gold to gain some traction on Wednesday.
• The underlying bullish sentiment around the USD kept a lid on any further gains for the metal.

Gold quickly reversed an early Asian session dip to weekly lows and was last seen trading with modest gains, just above the $1730 level.

A combination of supporting factors assisted the precious metal to gain some traction on Wednesday and recovered a part of the previous day’s losses. This also marks the first day of a positive move in the previous three, though any meaningful upside still seems elusive.

Investors remained cautious amid a spike in COVID-19 infections and a string of renewed lockdown measures in Europe. This was evident from a weaker trading sentiment around the equity markets, which was seen as one of the key factors that benefitted the safe-haven XAU/USD.

The risk-off mood, along with easing inflation worries contributed to the ongoing slide in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond retreated further from over one-year tops and extended some additional support to the non-yielding yellow metal.

The Fed Chair Jerome Powell, testifying before the House Financial Services Committee on Tuesday, downplayed the risks that economic growth would spur unwanted inflation. Powell, however, remained optimistic about the outlook and expected the economy to surge in the coming months.

Meanwhile, the supporting factors, to a larger extent, were offset by the underlying bullish sentiment around the US dollar. This seemed to be the only factor capping gains for the dollar-denominated commodity, warranting some caution before positioning for any further gains.

Market participants now look forward to the release of flash PMI prints from the Eurozone and the US. This, along with Powell’s second day of testimony before the Senate Banking Committee, might influence the USD price dynamics and produce some trading opportunities around the XAU/USD.

Technical levels to watch